It is exciting to experience tremendous growth in your medical practice, but eventually, significant growth will lead to change in the structure and size of your medical practice. Established practices often find it beneficial to acquire smaller practices, which can rapidly expand the products and services that are offered to their patients. If you, too, want to expand your practice, it is essential that you be open to acquisitions.
When the decision is made to acquire or merge a practice, the focus is often on increased leverage with paying patients, shared cost of electronic medical record (EMR) systems and decreased overhead expenses. Merging the brand is an afterthought. However, in reality, merging your brand image should be the most important decision in the process. Medical practices spend years creating their brand image by providing high-quality care and earning patients’ trust.
There are many reasons why a medical practice would even consider merger or acquisition with another practice. The most common reason is the potential growth. A merger may give a practice a chance to grow its market share and increase its brand value. In addition, diversification in services may put the practice at an advantage when it chooses to merge or acquire another practice.
Mergers and acquisitions are usually cost-effective. They can reduce the cost of marketing similar services that will complement a practice’s strengths. In addition, acquisitions are one of the best ways to eliminate possible competitors. Merging with a bigger practice can be a calculated step ahead when it comes to accomplishing long-term business goals. However, mergers and acquisitions are different processes and the problems that need to be addressed are different. Being mindful of these issues may help medical practice owners make the best decisions before jumping into the deal.
1. Lack of Clear Vision: Successful mergers and acquisitions begin with senior leadership crafting a clear vision that spells out the unique opportunities created by the transaction. The biggest issue is a lack of vision without full engagement from the merging practices. Too often, leaders focus on capturing the markets, the logistics of operations and restructuring the organization without asking the fundamental question, “What more could we do together?”
Answering this question is the first step toward building a sense of excitement and alignment around a common goal, which can produce a multiplier effect. It is the responsibility of the practice’s senior leadership to articulate a compelling and understandable vision that encourages staff to engage with the new business goals and help drive it forward.
The vision should be specific, enabling key stakeholders to determine if and when it has been achieved. The vision also needs to be communicated clearly to all employees in order to get their buy-in.
2. Not Paying Heed to Professional Advice: When practices are moving toward a merger or acquisition, the best thing they can do is consult with an experienced professional. M&A experts will look at the numbers to determine the potential for future growth, and they will help you see the possibilities that could be generated in the future.
Most practice owners do not have the experience or expertise to understand or handle a merger or an acquisition. Attempting a do-it-yourself could bring down the practice. You need to be sure that you are managing your cash flow, communicating with your staff and providing best-quality service to your patients throughout the transition.
3. Not Doing Your Homework: Even if the deal seems nice, you will still not know about the practice until you look at its books. It is important to have an audit done in order to be sure that you are not overlooking any critical financial information. This audit can give you a full picture of what you are getting yourself into from a financial standpoint. Even if you have a positive outlook for the future, there might be a lot of work required to get to that point. It is important to look at the real numbers to understand the debt load, cash flow and income that will need to be managed.
It is critical to stay grounded in this audit process. Often, practice owners get overly excited about the deal and end up overlooking the harsh realities that will pop up in their face a few months after the merger. It is good to be excited about the possibilities, but you also need to consider a realistic forecast and how it will impact the financial success of your transaction.
Not only should you audit the books, but also look at the online reputation of the practice and its staff. Finding a history of lawsuits or reputation problems could be a huge red flag that you are stepping into a bad deal. Ask questions about shareholder reputations. Look for details about legal or civil conflicts that have been recorded.
If you find that the practice owner is reluctant to have the audit done or tries to withhold financial information, you might consider walking away from the deal. It is important to have full transparency about the situation that will help you determine whether the merger is an intelligent move.
4. No Post-Merger Plan: While you are hoping that the merger will ensure profitability and success, there is a possibility that your efforts might fail. If things go wrong, how will you handle the repercussions? Often, practice owners know how to manage success, but they are unsure about how to handle failure.
You might not be planning to fail with this deal, but it is important to ensure that you have an exit plan in place. Talk to experts about all possible scenarios and put together a strategy that will help you handle the situation as it plays out. Maintain open communication with your team in order to ensure a smooth process.
Is the other practice in alignment with your practice’s culture and mission? There is an adjustment period after an acquisition. However, these adjustments can be impossible if you are bringing in employees who are accustomed to a drastically different work culture. If you want to merge staff from both the practices, you need to have a staffing plan in place that will bridge the gap.
5. Real Value for Your Practice: It is important that you develop solid evidence that the acquisition will bring value and revenue for your practice. Otherwise, you might be restricting the growth of your practice by bringing in another practice that is not sustainable.
If the practice you are acquiring is in serious financial trouble, you might have a hard time pulling the practice out of the nosedive. However, this situation can be a recipe for success if handled correctly. So, the best solution is to put together a detailed merger plan that can help you overcome potential financial roadblocks along the way.
The most effective way to support the growth of your practice is to work with a team of trusted professionals. These experts can resolve your doubts and sort through the numbers to identify the best- and worst-case scenarios in any given situation.
6. Retaining Best Employees: The entire merger process needs to be subject to due diligence with regard to staff members as well as financial capital. Often, the senior leadership team fails to develop an understanding of the people, processes and cultures that need to be addressed during transactions that are sensitive in nature.
It is important to engage as many employees as possible who will be impacted by the deal and involve them in defining how the business goals are to be met. The top management will need to use messaging that engages people at an emotional level. This will help drive the transformation forward and create a culture where employees will want to get involved, rather than policy dictated from the top.
For senior executives who may have lived through many mergers, the process may not be overwhelming. For employees, however, even the smallest organizational change can feel like a threat to their jobs. Transparency and empathy can go a long way toward making employees feel secure and valued.
7. Introducing Staff to New Processes: So, where do you start when you have two different ways of doing things? It is advised to build a detailed process inventory and impact analysis. Identify the processes that must be retained and the ones that need to go. Similarly, have a look at processes that work well and the ones that need improvement. Assess all processes and record their impact, thus making your practice more flexible and agile while merging resources.
During a merger or acquisition, staff often have a fear of incompetence. They assume their world is being turned upside down and are afraid their job may become obsolete. Your employees need training on the new processes and technology. In fact, some of the senior team members should be a part of developing these processes and help you streamline them as you integrate them. Your staff has to be trained on new processes and educated on how these will help them provide a better patient experience.
No magic bullet can guarantee the success of a merger or acquisition. However, paying attention to not just strategy, but to an ambitious vision that engages employees, will give your practice the best chance of being one of top few that succeed wildly.
In order to achieve this, create and communicate a vision that spells out the opportunity inherent in the change and engages employees with that vision.
Next, involve a cross-section of the workforce and build a sense of urgency. This will help you remove barriers and create a network to run alongside the traditional hierarchy.
These measures will help accelerate the transfer of ideas and enable the transition to continue at a speed that a traditional structure simply cannot achieve.